Sequestration Dragging Down DC's Economy, Mayor Says

Not too surprisingly, the mandatory federal budget cuts, or “sequestration,” that went into effect March 1 have had a negative effect on DC’s local economy, Mayor Vince Gray and other DC officials said at a press conference today. Because of the cuts, which are scheduled to continue into the next fiscal year beginning Oct. 1, Gray and his administration said unemployment is up, job growth is slowing, and the number of services the city provides to some of its neediest residents is on the way down.

The District’s economy stands to lose $60 million in the 2014 fiscal year, Gray said. On top of that, city agencies could lose another $30 million in federal grants, with many of the anticipated cuts coming to housing, public health, and education.

Since the sequester started, DC is home to about 7,000 fewer government jobs. Since September 2011, public-sector employment has dropped by 14,000. But while private-sector job growth has outstripped government job cuts over the past two years, it is starting to flatten out. After dipping to 8.4 percent last December, DC’s unemployment rate has since ticked back up to 8.6 percent, according to the federal Bureau of Labor Statistics.

Gray’s budget director, Eric Goulet, said that because of the anticipated losses in federal grants, the Department of Health will have to cut substance abuse treatments for 472 residents and administer about 12,600 fewer tests for HIV and AIDS. The cuts in federal grants mean that the DC Housing Authority has frozen enrollment in housing voucher programs, Goulet added.

Sequestration has not been kind to the suburbs, either. Last week, Senator Ben Cardin, Democrat of Maryland, bemoaned the cuts made in Montgomery and Frederick counties.

“I’m tired of seeing federal workers be made the scapegoat for every budget battle,” he told workers last week at the Rockville headquarters of the Nuclear Regulatory Commission, which had its budget slashed by $52 million.

DC’s overall revenue has been on a steady upward path for a few years, with a $417 million surplus posted for fiscal 2012. But income and sales tax revenue are also projected to level off as sequestration continues, said Fitzroy Lee, a city economist.

While Gray and his deputies touted their long-range plans to increase the number of private-sector jobs while the government payroll continues to dwindle, many of the jobs they are seeking to add might not replace the economic activity created by government workers who are being laid off and furloughed as a result of the sequestration. During the press conference, officials pointed to retail, hospitality, and health care administration as the most active industries, though none of those three fields are known for their lavish wages.

When retail came up—Gray projected adding more than 10,000 such jobs by 2017—reporters quickly pounced on the mayor for a decision on the Large Retailer Accountability Act, a bill that would require certain big-box stores, chiefly Walmart, to pay hourly employees a “living wage” of least $12.50 per hour. While Gray has finally received the bill, more than 50 days after the DC Council passed it, he said he has only just started to review it. A spokesman for the mayor insisted the statistics released today were not intentionally lined up with the wage bill, but the timing seemed a bit fortuitous.